NJ urges SCOTUS to rule that Kalshi sports bets are gambling, not "swaps"

New Jersey regulates gambling and prohibits betting on college sports entirely but hasn’t been able to enforce its laws against Kalshi. New Jersey’s petition asked the Supreme Court to determine “whether the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act preempted States from regulating sports bets that occur within their jurisdictions if those bets are offered on markets registered with the Commodity Futures Trading Commission.” New Jersey’s petition said that “if Kalshi is right that it can offer sports bets on federal exchanges irrespective of state law, companies can disregard all state sports-gambling statutes with ease, so long as they register with the CFTC.” New Jersey said the 3rd Circuit decision is “profoundly wrong.” “Placing sports bets, even when called by another name, is still gambling,” 9th Circuit Judge Ryan Nelson wrote. Judge Kenneth Lee said the outcome of a typical sports game is not an “event” with financial, economic, or commercial consequences as conceived in US law governing swap contracts. “Few people would describe, say, the New York Mets’ latest loss of a game as an ‘event.’… perhaps in an uber-technical sense a Mets’ loss could have marginal economic impact as some fans guzzle more beer to drown away their sorrows. But it seems somewhat fanciful to say that the outcome of a single game in a 162-game season is likely ‘associated’ with a ‘financial, economic, or commercial consequence’ that one would expect in a swap contract,” Lee wrote. New Jersey’s petition to the Supreme Court cited the 9th Circuit’s discussion of swaps and said that prohibiting state regulation of sports bets on prediction markets would conflict with other US laws on the balance of power between the federal government and states. “Kalshi argues that in granting the CFTC ‘exclusive jurisdiction’ over ‘swaps’ on CFTC-registered markets, Congress in 2010 actually preempted sports-wagering laws applied to these bets,” New Jersey said. “But as the Ninth Circuit has since explained, these sports bets are not ‘swaps’ as the statutory text and structure uses that term. And it strains credulity to hold that Congress in resolving the 2008 financial crisis took steps to federalize regulation of sports gambling that was otherwise explicitly addressed across other federal statutes spanning decades.” New Jersey argued that if Kalshi is right, it would mean casinos are violating US law. “Dodd-Frank also prohibits companies from offering swaps off of CFTC-registered markets. So if Kalshi is correct that Dodd-Frank federalized regulation of sports wagering, then state-licensed sportsbooks that everyone has understood to be legal since [Murphy v. NCAA]—including at brick-and-mortar casinos—have apparently been violating Dodd-Frank all along,” New Jersey said. New Jersey also said the CFTC’s exclusive jurisdiction over swaps doesn’t preempt state laws. The state argues that even if sports bets are considered swaps, the CFTC authority is exclusive only relative to other federal agencies. The CFTC authority doesn’t preempt states’ police powers over gambling, which “Congress repeatedly recognized and embraced across decades of reticulated federal gaming laws,” New Jersey said.